eTrade 2004 Annual Report Download - page 56

Table of Contents
Index to Financial Statements
As a result of the covenants and restrictions contained in the indenture, we are limited in how we conduct our business and we may be
unable to raise additional debt or equity financing to compete effectively or to take advantage of new business opportunities. The terms of any
future indebtedness could include more restrictive covenants.
We cannot assure you that we will be able to remain in compliance with these covenants in the future and, if we fail to do so, that we will
be able to obtain waivers from the appropriate parties and/or amend the covenants.
Our corporate debt levels may limit our ability to obtain additional financing.
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make investments or other restricted payments;
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enter into transactions with our stockholders or affiliates;
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sell assets or shares of capital stock of our subsidiaries;
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restrict dividend or other payments to us from our subsidiaries; and
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merge, consolidate or transfer substantially all of our assets.
At December 31, 2004, we had an outstanding balance of $185.2 million in convertible subordinated notes and $400.0 million in senior
notes. Our ratio of debt (our senior and convertible debt, capital lease obligations and term loans) to equity (expressed as a percentage) was
28% at December 31, 2004. We may incur additional indebtedness in the future. The level of our indebtedness, among other things, could:
The market price of our common stock may continue to be volatile
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make it more difficult or costly for us to obtain any necessary financing in the future for working capital, capital expenditures, debt
service requirements or other purposes;
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limit our flexibility in planning for, or reacting to, changes in our business; or
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make us more vulnerable in the event of a downturn in our business.
From January 1, 2003 through December 31, 2004, the price per share of our common stock has ranged from a low of $3.65 to a high of
$15.40. The market price of our common stock has been, and is likely to continue to be, highly volatile and subject to wide fluctuations. In the
past, volatility in the market price of a company’s securities has often led to securities class action litigation. Such litigation could result in
substantial costs to us and divert our attention and resources, which could harm our business. Declines in the market price of our common stock
or failure of the market price to increase could also harm our ability to retain key employees, reduce our access to capital and otherwise harm
our business.
We may need additional funds in the future, which may not be available and which may result in dilution of the value of our common
stock
In the future, we may need to raise additional funds, which may not be available on favorable terms, if at all. If adequate funds are not
available on acceptable terms, we may be unable to fund our business growth plans. In addition, if funds are available, the issuance of securities
could dilute the value of shares of our common stock and cause the market price to fall.
We have various mechanisms in place that may discourage takeover attempts
Certain provisions of our certificate of incorporation and bylaws may discourage, delay or prevent a third party from acquiring control of
us in a merger, acquisition or similar transaction that a shareholder may consider favorable. Such provisions include:
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authorization for the issuance of “blank check” preferred stock;
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provision for a classified Board of Directors with staggered, three-year terms;
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the prohibition of cumulative voting in the election of directors;